BRASILIA, Jan 7 (Reuters) - Brazil faces the possibility ofwidespread energy rationing for the first time since 2001, as ahot, dry summer has deprived hydroelectric dams of needed waterwhile boosting power use to run air conditioners in swelteringcities.

Even if the country escapes rationing, electricity expertssay it may have to boost use of thermo-electric power - a moreexpensive option which could undermine President DilmaRousseff's plans to lower energy rates.

Energy Minister Edison Lobao said the extra cost ofdiesel-fired plants would add less than 1 percent to consumers'electric bills during the months they are in use, ruling out thepossibility of new government controls.

"There is no chance of rationing, no chance of shortages,"Lobao said in an interview on the Globo television network.

On Monday, Brazil's stock market shed 1 percent as rationingfears intensified. Depending on how Rousseff handles theshortage - and whether it rains in the next few weeks - thefallout could impair Brazil's ability to hit its inflation goalin 2013 and damage growth in an already stagnant economy.

In late December, Rousseff dismissed the idea of rationingor a power crisis as "ridiculous."

But on Monday, Folha de S.Paulo newspaper reported that thepresident has called an emergency meeting of energy officials onWednesday to discuss the situation. Government officials toldReuters the meeting of a committee that monitors electricitysupplies was previously scheduled.

Brazil's mostly "green" hydroelectric power sector, whichaccounts for 67 percent of its electricity supply, has been theenvy of countries dependent on dirtier and more costly sourcesof power. But low water levels and dry climate are now showingthe vulnerability of depending on hydro-power.

Due to environmental restrictions, Brazil's newerhydroelectric dams have smaller reservoirs that are morevulnerable to changes in climate and drought.

Energy shortages and deficient infrastructure, which causedwidespread blackouts in Latin America's largest nation lastyear, are a sensitive issue for left-leaning Rousseff, who asenergy minister a decade ago was charged with making surerationing never happened again. An energy crisis on her watchwould dent her very high approval ratings.

The southern hemisphere summer is usually Brazil's wettestseason, but not this year. In the poorer northeast of thecountry, lack of rain has hurt corn and cotton crops, wiped outa third of sugar cane production and left cattle and goats tostarve to death in dry pastures.

CRITICAL RESERVOIR LEVELS

Brazil's private sector is growing increasingly anxious.

Shares in major power utilities traded on Sao Paulo'sBM&FBovespa fell 2.5 percent on Monday over concerns thatrationing would be implemented as water levels at hydroelectricdams dip near critical levels.

According to the national grid operator ONS, hydroelectricreservoirs in the populous southeast industrial hub of Brazilare operating at 28.8 percent of capacity, and those in the northeast are at 31.61 percent of capacity. Some reservoirs onlyhave enough water to operate for another six weeks.

"Let's hope for rain in January or February, becausereservoir levels are at their lowest in 10 years," said energyexpert Adriano Pires of the Brazilian Center for Infrastructure."If there is little rain and economic growth recovers, we arebound to have rationing before the end of the year."

While forecasters expect rain in the south, the Northeast issuffering its worst drought in decades, threatening hydro-powersupplies in an area prone to blackouts and potentially slowingeconomic growth in an emerging agricultural frontier.

Power consumption shot up in recent weeks due to hot weatherthat boosted air conditioner use.

GAS POWER AND HIGHER PRICES

Even though there are no estimates of the size of the energyshortfall, private players on Brazil's open electricity marketare already factoring energy rationing into their projections.

"The chance of not having rationing is small. The situationis ultra-critical," one power sector executive told Reuters lastweek. He added that his company has factored in a period ofrationing into its planning for the year. The executive spoke oncondition of anonymity due to the sensitivity of the matter.

Mauricio Tolmasquim, head of the federal energy researchinstitute EPE and a close associate of Rousseff's, said in aradio interview there was no risk of an energy shortage, notinggas-fired generators were on hand as a backup.